15 Comments

Summary:

Even as usage of mobile devices explodes, spending on mobile ads still lags spending on online ads by a huge margin. Will that gap narrow anytime soon? Here’s a look at some of the strategies that mobile marketers are using.

mobile advertising, Millennial Media

As Mary Meeker, the Queen of the Internet, made clear earlier this year, mobile is on the wrong side of a monetization gap. While consumers are spending more and more time on mobile devices, advertising revenue there is still lagging well behind traditional online — some $30 billion was spent in online advertising last year in the U.S. vs. $1.6 billion for mobile ads. Ad rates on mobile are 5 times lower than on desktop.

Mobile AdvertisingAdvertisers are expected to chase the eyeballs to mobile, though to what extent and how quickly is unclear. Mobile presents particular challenges for advertisers because they don’t have the same retargeting tools (like cookies) that they have online, the screens are smaller, and ads have the potential to be more intrusive than on the desktop. For now, marketers are spending more on ads for smartphones than for tablets, because more people own the former than the latter. But some of the metrics suggest that tablets may have better monetization potential. Click-through rates for the iPad, for example, are twice that of the iPhone, according to Inneractive, a mobile ad exchange, and thus the ad rates are also higher for the iPad.

Whether mobile ads ever catch up to online advertising in revenue will have huge ramifiations for big companies like Facebook, Twitter and Pandora whose audiences are rapidly shifting to mobile devices. Currently, the sectors that spend the most on mobile advertising are telecommunications, retail and restaurants, automotive, finance and education, according to Millennial Media. Many brands, however, are still just experimenting with mobile and are spending a very small percentage of their ad budget there.

Here’s a look at the main categories of mobile advertising, as well as some emerging strategies that publishers and developers are banking on to help close the monetization gap.

Search advertising

emarketer, mobile advertisingStill the big dog in mobile advertising, bringing in about half of all mobile ad spending. That is likely to continue as consumers turn to their smartphones as a research tool while on the go. As Google pointed out, the smartphone is often the first step in a longer research process that continues on a tablet or computer. Mobile search is also valuable for advertisers because most consumers are very intent-driven when they search on a mobile phone and are likely to complete a task after searching.

Google said that 9 out of 10 mobile searches by users have resulted in an action such as a purchase or a visit to a business. While Google, which pretty much owns this category, can obviously benefit from growing mobile search, local search engines like AroundMe and location-based services like Foursquare may also see a lift. The rise of mobile apps may also threaten Google as more consumers get their mobile queries answered through a dedicated application.

  • Amount forecast to be spent in the U.S. in 2012: $1.28 billion*
  • Companies with the most revenue: Google (95 percent of the market).

Rich media and video ads

Medialets, rich media mobile advertisingThese offer advertisers an often pricey way to take over a screen and give consumers what can be a more immersive experience. Advertisers can use video, animation, photo galleries and interactive elements, which can make mobile advertising more akin to a TV commercial or a slick magazine. Opera Software, the mobile browser company, reported in July that users who clicked on a rich media ad spent an average of 52 seconds viewing a video and 1 min and 25 seconds interacting with photos. Opera noted that advertisers have started using rich media and video ads more frequently this year than traditional banner ads.

  • Amount forecast to be spent in the U.S. in 2012: $647.1 million*
  • Companies with the most revenue: Apple iAd, Medialets, Crisp, Celtra

Banner display ads

Mobile advertisingSome of the most popular ad units in mobile are banner display adds, but in terms of ad spending, they were eclipsed by search ads last year. Display ads are still very prominent, in part because advertisers can buy in standard formats, like they’re used to doing online. But the units are problematic on small screens because they can trigger more accidental clicks.

And if advertisers keep the banners small to avoid turning off users, then they can run into another problem — namely that they’re harder to make engaging and thus easier for readers to ignore. A traditional online banner ad may fetch $3 to $5 for every thousand impressions, which is still a lot more than mobile banner ads, which receive $1 or less on a smartphone, the New York Times reported. Banner ads won’t fade overnight but they are losing favor with advertisers. Opera Software said that static and expandable banners went from 66 percent of ads in January of this year to 36 percent in June.

  • Amount forecast to be spent in the U.S. in 2012: $457.5 million*
  • Companies with the most revenue: Pandora, Google, Twitter, Millennial Media, Apple and Facebook

Those are the major mobile ad types that are growing. Below, are some other formats where the spending is smaller but that publishers and developers have high hopes for.

Location-based advertising 

Location-based mobile advertisingOne of the most promising parts of mobile advertising because it leverages the mobility of smartphones and tablets. But the early efforts have been slower to take off, in part because ads delivered via geo-fencing or proximity don’t necessarily catch people at a time when they want to act or don’t factor in a person’s preferences. Providers like Sense, JiWire and WHERE are getting smarter about mixing location data with behavioral profiles to deliver more relevant ads to people.

Companies like Waze, a crowd-sourced navigation app, and Roximity, which hooks into in-car entertainment systems, are showing how drivers can also be targeted with location-based ads in their car. There is a danger in being too pushy with location-based ads, and creeping out users who don’t know their location is being tracked. BIA/Kelsey forecast that U.S. mobile local ads, based on a user’s location, will grow from $664 million in 2011 to $5.8 billion in 2016.

  • Early leaders: JiWire, WHERE, Sense Networks

Native advertising

Facebook, mobile adsThe latest rage for companies like Facebook, Twitter and Tumblr. Unlike with standard ad units, publishers help advertisers create messages and content that work within the flow of their platforms. By using the existing units of content, like a tweet or update, advertisers have an organic way to advertise through mobile that is harder to ignore.

Facebook said it now gets 14 percent of all of its revenue via mobile sponsored stories and install ads, which appear right in the news steam of its mobile apps and website. EMarketer estimated that Twitter would make $129.7 million in mobile advertising this year, more than Facebook. The challenge with native advertising is that it can be hard to replicate across different publications and often requires more work to cater to each platform.

  • Early leaders: Facebook, Twitter, Tumblr

Other

There are some other approaches that show that it’s not just about placing a basic ad somewhere in an app or website. Kiip (see disclosure below) rewards people after achievements and milestones during games and apps. Pontiflex lets people sign up to receive ads and offers from brands they select. Appssavvy allows advertisers to place ads alongside activities inside apps and websites. Tapjoy helps people earn in-app rewards for watching videos, installing apps or subscribing to services. Conduit is creating lock-screens for Android devices that can be branded and potentially carry advertising.

*figures from eMarketer

Disclosure: True Ventures is an investor in Kiip and the parent company of this blog, Giga Omni Media. Om Malik, founder of Giga Omni Media, is also a venture partner at True.

  1. I suspect that the true benefit of mobile ads wont be seen till advertisers start taking the mobile devices seriously as a separate channel instead of lumping it in with the rest of “digital”

    Share
    1. yeah, still an experiment for many companies

      Share
    2. Lump it into the rest of digital, as long as it is properly planned for it can be great. It’s up to be ready first. You can’t make a great mobile ad with out a great place to put it.

      Share
  2. I have come up with a solution of low eCPM for indie devs and small businesses…..its an open marketplace ( 0% revenuw share) where buyers and publishers and collaborate in real time…

    adzforappz.com

    Share
  3. In India, mobile advertising is mostly used by downloading products and free classified companies, which i experience.

    Share
  4. *ramifications

    I agree with Miko. I’ll admit that I don’t even pay that much attention to how my blog comes together in it’s mobile format. But if this is the way things are moving, maybe it’s time that I start doing that. I’ve heard some of my friends and family state that they’re not comfortable with buying things on their phone because then they’ll get texts from the companies they purchased from, or those businesses will have that information. I thought that was interesting because they don’t seem to mind the clump of emails that they get from businesses on the internet from their desktop, yet they still use that method pretty frequently. Interesting…
    tlcurtis.us

    Share
  5. *its :D

    Share
  6. Rob Woodbridge Friday, November 16, 2012

    Great summary Ryan. I think it is the location-based marketing and the category labeled “other” that will really show the power of the mobile platform to drive sales, foot fall and brand engagement. Banner ads, interactive banner ads, sponsored posts and search advertising are often times far too random to generate consistent and effective results. Mobile is about targeted, focused outcomes with real results. Plus, can we really be happy with a 2% “effective” rate on mobile?

    Share
  7. I agree that mobile advertising has a way to go before it reaches the potential we all know it has, but that day is coming much sooner than it is implied in this article. The sophistication of mobile advertising tools and resources is coming along great. I can attest to this as a developer. Airpush’s new SDK, for example, represents the next generation of mobile advertising resources, particularly when it comes to ad format diversity and a host of other bells and whistles. My CPMs for the last few months would back this up to. So I think there is reason for a lot more optimism than what’s being portrayed here – http://www.airpush.com/advertisers

    Share
  8. The true value in mobile and the future growth of this media will be when it is used not as some ‘stand alone’ push ad solution but rather as a way to create engagement between brand & consumer from traditional media. See, hear, read be recommended a brand message, go mobile and land to a real time optimized solution. The real time collection of opt in data from the consumer and invaluable media analytics will lead this ‘personal’ connected device to serve true purpose. JUST don’t use it to spam consumers or else your mobile experience will be short lived.

    Jonathan
    TheTMSway Ltd

    Share
    1. Jonathan – great points. For the large brand who can afford to make highly creative, engaging advertising the engagement route is clearly the solution.
      For smaller operators, they are best suited to focusing on search IMO.
      The Internet is like a giant yellow pages directory and the best leveler of the playing field is search and niche content marketing, IMO.
      Wrote a blog post about it http://creativeagencysecrets.com/the-internet-is-becoming-a-giant-yellow-pages/
      And yes, don’t spam or we’ll have do not track and other tools used against the marketing industry and then our hands will be tied and we’ll have blown our chance to get real consumer engagement and deep data insights.
      Rebecca Caroe
      Creative Agency Secrets

      Share
  9. @ TL Curtis. Agreed on the separation of desktop and mobile devices when it comes to consumer comfort with commerce. The overall mobile eco-system is in infant stages. As you mentioned about your blog, it sounds like you’ve not mobile optimized the blog as of yet. That is one small example of the challenges mobile advertisers, their agencies, and the publisher/blogging community face to really grow mobile media spending. It’s a highly fragmented market, with little to no audience tracking and none of the tried and true strategies of digital display. Companies like Coffee Table (http://coffeetable.com) are helping build and scale m-commerce enabled sites. In all transparency, my company PadSquad (www.padsquad.com) helps bloggers/indie publishers get free HTML5 tablet sites and matches them with national brand advertisers. The point is: the industry will change and grow quickly, only because consumer activity is demanding it. Cheers- Dan Meehan, @meehandanile @padsquadmedia

    Share
  10. Thanks for this great article on the importance of mobile advertising. As you mentioned, cookies don’t work and other solutions such as UDID and IFA only work in-app or raise serious privacy concerns. In order to move advertising forward with the mobile-obsessed world, marketers need to find a universal device recognition solution that will keep the interests of consumers and marketers in mind.

    Four Ways to Circumvent Mobile Marketing Roadblocks – Read More
    http://blog.adtruth.com/4-ways-to-circumvent-mobile-marketing-roadblocks/

    Share
  11. Is the real value of mobile really going to come from advertising? I would argue that mobile advertising has not really been 100% successful to date. Sure, the increased relevance that might come from location, social network integration and actionable offers might lead to more consumer value, but mobile advertising, whatever the format, will still be push marketing. Push marketing on such a small screen, with so much else vying for your attention is not, in my opinion, ever going to create long term relationships or value. It is invasive and somewhat backward looking – mobile has so much more to offer that a re-engineering of web display ads.

    Jonathon Edwards looks to joining mobile with traditional media as a source of consumer value, and tying up these two channels makes perfect sense, but why stop there? Mobile is unique in that it is present across many channels, and stays with the user as they move from screen to screen, media to media and channel to channel.

    In this increasingly multi-channel, social and reputation driven world, mobile has the potential to be the unifying element that turns a brand engagement into a brand relationship. Mobile is not just about any one thing, it has the power to be a part (big or small) of almost every consumer journey – allowing dynamic and intelligent comms and dialogue that blends the online and offline worlds.

    What I am suggesting is a paradigm shift in marketing and comms. Starting to think less about mobile (or other channels) in isolation, and starting to talk about ‘experience’, is where the real consumer and business value lies. There are very big barriers to this happening. Specialist agencies and silo mentalities in corporations both conspire to mask the real consumer demand and value opportunity – Brands and businesses that are always accessible, consistent, meaningful and valuable across any channel.

    Simon Liss
    Heavy Air Ltd

    Share
  12. Look at all you idiots commenting and peddling your products.

    Share

Comments have been disabled for this post